Sterling fell to its lowest level of 2021 against the dollar on Thursday as the British economy appeared to lose momentum and a surge in U.S. inflation boosted the greenback amid bets that the Federal Reserve would hike interest rates faster than expected. Data released by the Office for National Statistics showed Britain’s economy grew by 0.6% in September but estimates for previous months were revised lower, leaving the economy still smaller than it was in February 2020. “The latest UK growth data has done little to help the pound at a time of weakness”, IG market analyst Joshua Mahony commented. Sterling fell to its lowest since December 2020 in morning trading at $1.3365 and failed to recover through the session. At 1614 GMT it traded down 0.13% at $1.3385. In its November policy meeting, the Bank of England left its main interest rate unchanged at 0.1% having previously signalled it could raise it. Markets are now pricing in a high probability of a December rate rise but uncertainty remains high. . ING market economist James Smith said he believed the slowing momentum of the British economy was unlikely to have a major influence on BoE policymakers for whom the recovery of the labour market is a key priority. “It’s a close call between a December and February rate rise, though we think the former is more likely - especially if the jobs data brings the committee good news”, he said in a client note. A tighter monetary policy would help boost the British currency, economists say. “The expectation, and eventual delivery, of a rate hike should allow sterling to recover its recent losses,” said Dean Turner, an economist UBS Global Wealth Management. Currency derivative markets are expecting more weakness for the pound with the cost of options to protect against further downside at its highest level since the 2016 Brexit referendum. Versus the euro, the pound ticked down 0.1% at 85.66 pence. Also rattling investors’ nerves is the post-Brexit dispute between Britain and the European Union over trade with Northern Ireland. Ireland’s foreign minister said on Thursday that comments from Britain’s Brexit minister suggest there is still some time to find a solution to trading difficulties before Britain seeks to scrap some of the post-Brexit arrangements.